The State of Retail: The Emergence of Fluid Experiences

We are now liv­ing in a world dom­i­nat­ed by the consumer—a “gold­en age” for con­sumers, if you will. Nowhere is this more obvi­ous than in the retail indus­try. Shop­pers are in con­trol, look­ing for mer­chan­dise online, buy­ing through e-com­merce web­sites, and even check­ing com­peti­tor prices while they are in your store.

How do we win in this gold­en age of the con­sumer?

First, we must under­stand what it is that today’s con­sumers want from brand engage­ments. They are demand­ing con­nect­ed expe­ri­ences when it comes to inter­act­ing with your brand.

Cus­tomers expect flu­id expe­ri­ences.

Con­sumers want their expe­ri­ences with retail brands to flow from one chan­nel to anoth­er, just like they flow from one activ­i­ty to anoth­er. Last year, Ed Nar­doza, edi­tor in chief of Women’s Wear Dai­ly, com­ment­ed “The best retail­ers don’t real­ly dif­fer­en­ti­ate phys­i­cal from dig­i­tal shop­ping. They need to offer what­ev­er expe­ri­ence and con­ve­nience the shop­per demands, when they demand it.” Very true!

Today, con­sumers are look­ing for a flu­id expe­ri­ence on their jour­ney with your brand. At each stage of the cus­tomer jour­ney, they encounter dif­fer­ent touch­points. The path is not always lin­ear, they may advance and retreat along the jour­ney. And these days, touch­points are emerg­ing, such as Inter­net of Things devices, that intro­duce new chal­lenges for mar­keters. Those touch­points must be con­nect­ed in a way that pro­vides a flu­id brand expe­ri­ence with­out treat­ing the jour­ney as mov­ing in a sin­gle direc­tion.

While the phys­i­cal store is still a crit­i­cal part of the flu­id expe­ri­ence, the dig­i­tal jour­ney is now con­tribut­ing to a sig­nif­i­cant part of the buy­ing process. In fact, the phys­i­cal and dig­i­tal expe­ri­ences are hap­pen­ing simul­ta­ne­ous­ly. In fact, Price­Wa­ter­house­C­oop­ers found that over one-third of glob­al shop­pers com­pared in-store prices with com­peti­tors while they were in the store. This behav­iour should com­pel all retail­ers to focus on deliv­er­ing a flu­id expe­ri­ence.

Retail expe­ri­ences will be more “con­ver­sa­tion­al.”

To com­pete, we must also under­stand what retail expe­ri­ences will look like in the future. We can expect a con­tin­ued rise in e-com­merce, accord­ing to eMar­keter, which expects dou­ble-dig­it growth through 2020. Use of voice-acti­vat­ed house­hold devices like the Ama­zon Echo pro­vide anoth­er inter­ac­tion point—one that can be expect­ed to dri­ve e-com­merce sales, if the expe­ri­ence is good. And it opens anoth­er chan­nel to pro­vide the flu­id expe­ri­ence through­out the cus­tomer jour­ney.

In the future, con­sumers will expect a con­ver­sa­tion­al, con­ve­nient brand engage­ment, pow­ered by arti­fi­cial intel­li­gence and machine learn­ing. Accord­ing to Forbes mag­a­zine, Sonar (the research unit at J. Wal­ter Thomp­son) revealed that 72 per­cent of US mil­len­ni­als and 64 per­cent of UK mil­len­ni­als believe that “as the tech­nol­o­gy devel­ops, brands using AI will be able to accu­rate­ly pre­dict what they want.”

Brick-and-mor­tar retail­ers will need to address the ele­phant in the room: decreas­ing store foot­fall. Deloitte believes that in-store expe­ri­ences will “increas­ing­ly focus on one of two things: inspi­ra­tion or con­ve­nience.”

Retail mar­gins have got­ten razor thin. In Deloitte’s Glob­al Pow­ers of Retail­ing Report 2017, the top 250 retail­ers aver­age a net prof­it mar­gin of 3 per­cent. So they don’t have a lot of options when it comes to invest­ing in cre­at­ing flu­id expe­ri­ences. Those expe­ri­ences must be pre­pared, test­ed, and deliv­ered using an effi­cient approach that lever­ages data in an opti­mal way.

Ama­zon, an ear­ly entrant in cre­at­ing flu­id expe­ri­ences, start­ed with online shop­ping with home deliv­ery, then moved to two-day deliv­ery, then to one-day deliv­ery, and now to one-hour deliv­ery in select loca­tions through its Prime ser­vice. They have changed the rules of the retail game by improv­ing the shop­ping expe­ri­ence con­tin­u­ous­ly. Every such improve­ment in the shop­ping expe­ri­ence requires invest­ment and is not nec­es­sar­i­ly prof­itable, but Ama­zon uses this as a loss leader.

The com­pa­ny is deliv­er­ing expe­ri­ences at a loss, pre­dict­ing that if the expe­ri­ence is good, it will encour­age cus­tomers to remain with­in the Ama­zon ecosys­tem, and con­se­quent­ly trans­act more with Ama­zon. With Ama­zon Echo, the com­pa­ny has bypassed most com­mon cus­tomer engage­ment points, such as a Google query, prod­uct search on Apple, or Android devices, and now it owns the end-to-end inter­ac­tion exclu­sive­ly. Ama­zon is expect­ed to lose approx­i­mate­ly US$930 mil­lion over 2016 and 2017, accord­ing to the Finan­cial Times, from its invest­ments in Ama­zon Echo.

Retail­ers must now under­stand what it takes to bring the flu­id expe­ri­ence to your cus­tomers. The over­ar­ch­ing prin­ci­ples that must be addressed include:

Expe­ri­ence-dri­ven commerce—having a men­tal­i­ty that focus­es on pro­vid­ing the expe­ri­ence first, before sat­is­fy­ing com­mer­cial demands (if the expe­ri­ence is right, the finan­cial rewards will come)

Con­nect­ed experience—bringing togeth­er device-spe­cif­ic chan­nels and plat­forms in a way that sup­ports flu­id tran­si­tions between online and offline inter­ac­tions

Pre­dic­tive analytics—leveraging arti­fi­cial intel­li­gence and machine learn­ing in a way that delights and sat­is­fies

Tech­nol­o­gy and inno­va­tion will con­tin­ue to make address­ing these over­ar­ch­ing prin­ci­ples eas­i­er and more cost effi­cient. Retail­ers like Ama­zon have made the ear­ly invest­ments to pro­vide the flu­id expe­ri­ences cus­tomers crave. And the con­sumer expec­ta­tion for seam­less move­ment between touch­points will fur­ther define how we engage with them.

It’s an excit­ing time to be a con­sumer. But it is also excit­ing for retail­ers who address the need for flu­id expe­ri­ences. The rewards for those who meet con­sumer expec­ta­tions include high­er mar­ket share, broad­er sales, and greater brand loy­al­ty.

The state of retail is strong, but con­stant­ly evolv­ing. Stay tuned!